What Should Shareholders Do When Treated With Unfair Prejudice
What is unfair prejudice? Prejudice is an attitude or opinion formed without adequate knowledge or justification. Unfair prejudice is a term used in the Companies Act 2006 to describe a situation where a company’s shareholders are treated unfairly, or their rights are breached by the company’s actions. In this blog post, we’ll explore what unfair prejudice is, give examples of it, and discuss the implications of the Companies Act 2006.
What is Unfair Prejudice?
Under the Companies Act 2006, unfair prejudice arises where a company’s shareholders are treated unfairly, or their rights are breached by the company’s actions. This can be anything from a director acting in an oppressive manner, to the company’s affairs being conducted in a way that is unfairly prejudicial to some of the shareholders.
Definition
The Companies Act 2006 defines unfair prejudice as “conduct which has caused, or is likely to cause, a substantial and unreasonable prejudice to the interests of the company’s members or of any of them”.
Examples
Examples of unfair prejudice include:
- The company’s affairs are conducted in a way that is unfairly prejudicial to some of the shareholders.
- A director is acting in an oppressive manner.
- The terms of a company’s articles of association are being breached.
- The company is making decisions that are not in the best interest of the company.
- One shareholder is receiving preferential treatment.
The Companies Act 2006
The Companies Act 2006 is the primary source of legislation that governs the running of companies in the UK. It includes measures to protect shareholders from unfair prejudice and provides remedies for those who have been unfairly prejudiced.
Overview
The Companies Act 2006 includes measures to protect shareholders from unfair prejudice. Section 994 of the Act provides a statutory remedy for shareholders who feel they are being treated unfairly, or their rights are being breached. Under the Act, a shareholder can make an application to the court for relief on the grounds of unfair prejudice.
The Unfair Prejudice Provision
The provision allows a shareholder to apply to the court for relief on the grounds of unfair prejudice. The court can then order the company to take action, or to pay compensation, if it finds that the company has acted in an oppressive manner or has conducted its affairs in a way that is unfairly prejudicial to some of its shareholders.
Consequences
If the court finds that the company has acted in an oppressive manner or has conducted its affairs in a way that is unfairly prejudicial to some of its shareholders, it can order the company to take action to remedy the situation, or to pay compensation. This could involve the company being ordered to buy back the shares of the unfairly prejudiced shareholder, or to make other arrangements to compensate them for their losses.
Conclusion
In summary, shareholders can seek relief on these grounds under the Companies Act 2006. This includes seeking a court order to resolve the dispute, which may involve a range of remedies, including ordering the company to buy out their shares or winding up the company. It is important to have the right legal advice and support when taking such action.
Our Dispute Resolution team, led by Rupert Farr, can assist you in navigating through the process of claiming relief under the Companies Act 2006. We can provide guidance and advice to help you understand your rights and responsibilities as a shareholder and ensure that you have the best possible outcome.
Author: Glayson Tavares-Costa, trainee solicitor at Blake-Turner LLP